Wed, Apr 09, 2014 - Page 8 News List

Taiwan was stripped of growth by ‘China’ trap

By Chang Hung-yi 張弘毅

World Bank statistics show that after 1978, when then-Chinese leader Deng Xiaoping (鄧小平) announced China’s opening up and economic reforms, GDP per capita in China increased by a significant amount, from US$190 in 1978 to US$930 in 2000.

However, just before the 2000s, Taiwan started to make considerable contributions to China’s economic growth and statistics show that, as of 2012, per capita GDP in China reached US$5,720.

The differences in growth for these two periods are a direct result of the nation providing China with the three most important factors for economic growth it needed: capital, technology and skilled workers.

The large increase in population that China experienced after the Cultural Revolution was predominantly derived from an increase in the number of peasant workers. Given that context, economic development policies were not geared toward high-technology industries, but rather labor-intensive ones.

Taiwan, with its many labor-intensive industries, is naturally one of China’s most useful means for increasing economic growth. The nation has a detailed division of labor within its technological industries and has production processes based on the ideas of scientific management, otherwise known as “Taylorism” as proposed by US engineer Frederick Taylor. Under such a system, the tasks of each person are carefully allocated; everyone can be matched with a job somewhere, doing something, even if they are illiterate, as long as they are able-bodied.

When China needed to improve its economy, where better to look than across the strait, especially as tens of thousands of people in China were looking for work in factories, where they did not require an education and where they speak the same language?

In Taiwan, for the past decade, industries have been moving offshore, mostly to China, and human resources and capital have been lost as a result.

Information from the National Development Council shows that in the past 10 years, Taiwanese investment in China each year has been more than US$60 billion, which makes Taipei the second-largest foreign investor for Beijing.

The industries that moved to China were the backbone of the nation’s competitiveness and were developed through a series of measures starting with the Statute for Prizes, Awards and Investments (獎勵投資條例) that was rolled out in 1960, as well as the Statute for Upgrading Industries (促進產業升級條例) that was scrapped in 1991.

Now, these industries that provided such strong growth have, for the most part, become major contributors to China’s economic growth.

Looking back over the past decade, the opening up of trade between the two nations has been good for China for the short and long term, while for Taiwan, things have been good in the short term, but miserable in the long term.

If the nation had not opened up so much all those years ago, it would not have become a country with a closed-door economic policy, because beyond China, the entire world could have been its market.

If, all those years ago, the nation had not entered China, industries here would have been forced to upgrade their technologies and create more added value to ensure their survival.

If, back then, the nation had not cooperated with China so much, the economy would not have been totally stripped of its potential for growth.

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